That means that Britain’s extraordinary baby boom – births are at their highest level since 1972 – will end up proving immensely more significant to our long-term prosperity than whatever tweaks to monetary policy Mark Carney, the Bank of England’s new Governor, chooses to introduce.

The extent of Britain’s resurgent birth rate is as stunning as it has been overlooked. A remarkable 729,400 babies were born in England and Wales in the year to June 2012, the most for 40 years, according to the Office for National Statistics. Combined with an elderly population that is living longer, the gap between births and deaths is rising, and this, rather than net immigration, is what is driving the majority of the UK’s population increase (though many of the babies born are to migrant parents).

In 2003, the difference between the number of people who were born and those who died was just 77,000; last year, it had reached 239,100.

Britain is undergoing a demographic explosion; even with tighter rules on non-EU immigration, our population is rocketing.

These data will warm the hearts of those of us who believe every birth to be a miracle that deserves to be celebrated, and that human beings, as the US economist Julian Simon used to say, are a society’s ultimate resource – but the numbers are also bound to horrify those neo-Malthusians convinced that our islands are already too full to be able to cope with a much larger population.

The Government should resist the temptation to pander to the latter group. Instead, it should wake up to the magnitude of the baby boom and use it as a catalyst to kick-start its stalled supply-side economic reforms. The Malthusians are misguided, but doing nothing would guarantee a social disaster, squander a new generation’s life chances and blow a unique opportunity to transform the UK’s prospects.

That is certainly an argument that would strike a chord with a large section of the electorate.

We need more and better schools to educate much larger cohorts of children, and that means accelerating Michael Gove’s reforms and allowing private, for-profit firms to operate state schools, incentivising them to boost the supply of places.

We need more homes in which to house young families, which will only happen if private companies have the right to build the right kinds of properties where people actually want them; lower marginal tax rates on capital and labour to ensure we have the growth and jobs to ensure that today’s children and their parents are able to fulfil their potential; and genuine deregulation to liberate the economy’s productive potential. Our debilitating political paralysis and inability to get things done, especially when it comes to infrastructure, will make it especially tough to cope with all these new babies. We need more of everything, from shale gas plants to roads to airports, and the only way we will get this is to harness competitive capitalism and the profit motive, rather than relying on a dysfunctional public sector.

Crucially, people’s wages are determined by their productivity, which in turn depends on physical and human capital. Incentivising companies to invest more will be crucial to ensuring that wages start rising again, and that the next generation can enjoy high-paying jobs.

It will be vital to get this right. While many other economies will suffer a collapse in their populations, the UK will be one of the few to buck the trend. Our relative power could therefore increase dramatically over the next few decades, but only if we push through the necessary supply-side reforms to ensure that our rising workforce remains productive, employable and competitive.

The United Nations expects our population to peak at 77.2m by the end of the century, based on the most likely demographic assumptions. The UK was home to 62m people in 2010, a number expected to reach 63.8m by 2015. Long-term forecasts depend on many unpredictable factors, including immigration and emigration. But assuming no new world wars or destructive epidemics, and that we continue to embrace globalisation, our population is set to grow at a much faster rate than that of most of our neighbours. The UN also produces more extreme forecasts, based on higher birth rate assumptions: on the high fertility hypothesis, our population could reach an astonishing 115m by the end of the century, though that is implausible.

Even on the most sensible estimate of future birth rates, we will overtake Germany in 37 years’ time. Its population peaked in 2005 at 83.8m, and it has been shrinking ever since. There will be only 82.6m German residents by 2015 and numbers will continue to slide until the end of the century, falling to just 56.9m by 2100. Slowly but surely, this will erode Germany’s relative importance in Europe, and ultimately its strength in Brussels.

A shrinking population implies a reduced domestic market, diseconomies of scale and falling house prices and commercial property values. This may sound counter-intuitive to some, but a high population density is good for growth in a developed capitalist society with strong institutions.

Ageing entails a reduction in dynamism and entrepreneurship, as company creation is biased towards younger people; it also means that the pressure on unfunded retirement schemes and public health systems will prove to be even more extreme than elsewhere.

It is not just Germany that will begin to wither away, relinquishing economic, cultural and political clout: Italy will lose a lot of its people, as will Spain, Portugal and Greece. Russia’s decline will be extreme: from a peak of 148.6m in 1995, its population will be just above 100m by the end of the century. Demographic decline will go hand in hand with a reduction in its military and geopolitical reach.

Japan’s slide will be equally drastic: its population will slump from a high of 127.3m in 2010 to just 84.5m by the end of the century. Most shocking of all will be China’s fate, the direct result of its one-child policy: after smashing the 1bn mark for the first time in the 1980s, its population, now at around 1.39bn, will peak at 1.45bn in 2035, before plummeting by 363m to 1.085bn.

By contrast, the minority of Western countries that will grow their populations will see their influence begin to rise again. Britain won’t be alone. America’s population will shoot up from 312m in 2010 to 462m. Australia, Canada and France will also boom.

As one of the surprise winners from the great demographic shifts of the 21st century, the UK is being presented with a huge opportunity, as well as an immense challenge.

The time to prepare is now. For the sake of a new generation of children, and their future prospects and happiness, we cannot afford not to reform our economy.